Question 1

In the simple monetary policy rule, if   
, the AD curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 2

Under rational expectations, people use ________ to make their best forecasts of the coming rate of inflation.

Accepted Answer

A)  all the information at their disposal 
B)  all past rates of inflation 
C)  announcements by the Fed 
D)  only the Fed's inflation target 
E)  the unemployment rate 
A)  all the information at their disposal 
B)  all past rates of inflation 
C)  announcements by the Fed 
D)  only the Fed's inflation target 
E)  the unemployment rate

Question 3

The effects of 9/11 were a leftward shift in the AD curve; short-run output fell along the AS curve.

Accepted Answer

A) True 
 B)False

Question 4

If   
, and   
, what would the simple monetary rule dictate the real interest rate be if   
? If   
? In each case, is the economy in an expansion, in a recession, or in the long run?

Accepted Answer

The simple monetary rule is: @#IMG-DLM&

Question 5

Which of the following is the aggregate supply curve?

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 6

A sudden increase in the price of oil would cause the AS curve to shift up and to the left.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following countries did NOT adopt an explicit inflation target?

Accepted Answer

A)  Mexico 
B)  the United Kingdom 
C)  the United States 
D)  Brazil 
E)  None of these answers is correct. 
A)  Mexico 
B)  the United Kingdom 
C)  the United States 
D)  Brazil 
E)  None of these answers is correct.

Question 8

A change in which of the following parameters would cause a movement along the AD curve   ?

Accepted Answer

A)    
B)    
C)    
D)    
E)  None of these answers is correct. 
A)    
B)    
C)    
D)    
E)  None of these answers is correct.

Question 9

Use the aggregate supply/aggregate demand model in Figure 13.4 to answer the following scenario. In the 1990s, Japan experienced a prolonged sluggish economy. If the Bank of Japan targeted inflation, it would have responded to this situation by ________ the inflation target rate, pushing the economy from point ________ to point ________; eventually the economy would have returned to the steady state at point ________.

Accepted Answer

A)  raising; a; b; c 
B)  lowering; a; b; c 
C)  raising; a; d; c 
D)  lowering; c; d; a 
E)  Not enough information is given. 
A)  raising; a; b; c 
B)  lowering; a; b; c 
C)  raising; a; d; c 
D)  lowering; c; d; a 
E)  Not enough information is given.

Question 10

Refer to the following figure when answering the following questions.
Figure 13.5: AS/AD Model  
-Consider Figure 13.5. If the Fed sets a higher inflation target, under rational expectations, the economy moves from point ________ to point ________.

Accepted Answer

A)  a; c slowly 
B)  a; c instantly 
C)  a; d instantly 
D)  b; d slowly 
E)  b; c instantly 
A)  a; c slowly 
B)  a; c instantly 
C)  a; d instantly 
D)  b; d slowly 
E)  b; c instantly

Question 11

If   is relatively high, monetary policy is relatively ________ and the AD curve is ________.

Accepted Answer

A)  permissive; relatively flat 
B)  aggressive; relatively steep 
C)  aggressive; relatively flat 
D)  permissive; relatively steep 
E)  permissive; vertical 
A)  permissive; relatively flat 
B)  aggressive; relatively steep 
C)  aggressive; relatively flat 
D)  permissive; relatively steep 
E)  permissive; vertical

Question 12

Which of the following shifts the aggregate supply curve?

Accepted Answer

A)  a change in   
B)  an increase in the price of oil 
C)  the current inflation rate 
D)  raising the federal funds rate 
E)  All of these answers are correct. 
A)  a change in   
B)  an increase in the price of oil 
C)  the current inflation rate 
D)  raising the federal funds rate 
E)  All of these answers are correct.

Question 13

If British incomes rose, this would be reflected in the short-run model as a shift in the U.S. AS to the right.

Accepted Answer

A) True 
 B)False

Question 14

Consider the monetary rule   . If the inflation rate is 4 percent, the marginal product of capital is 2 percent, and the target rate of inflation is 3 percent, then the real interest rate should be ________ percent.

Accepted Answer

A)  3.50 
B)  3.25 
C)  2.25 
D)  1.75 
E)  2.50 
A)  3.50 
B)  3.25 
C)  2.25 
D)  1.75 
E)  2.50

Question 15

If   equals zero, the AD curve is:

Accepted Answer

A)  horizontal. 
B)  relatively steep. 
C)  relatively flat. 
D)  vertical. 
E)  Not enough information is given. 
A)  horizontal. 
B)  relatively steep. 
C)  relatively flat. 
D)  vertical. 
E)  Not enough information is given.

Question 16

If   in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

Accepted Answer

A)  lower the target rate by 2 percent. 
B)  raise the interest rate by 1 percent. 
C)  lower the interest rate by 1 percent. 
D)  lower the marginal product of capital by 1 percent. 
E)  Not enough information is given. 
A)  lower the target rate by 2 percent. 
B)  raise the interest rate by 1 percent. 
C)  lower the interest rate by 1 percent. 
D)  lower the marginal product of capital by 1 percent. 
E)  Not enough information is given.

Question 17

An increase in military spending will cause the AD curve to shift to the right.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the following figure when answering the following questions.
Figure 13.1: AD Curve  
-Consider Figure 13.1. If there is a positive aggregate demand shock and inflation remains constant, the economy would move from point e to point:

Accepted Answer

A)  d. 
B)  a. 
C)  c. 
D)  b. 
E)  None of these answers is correct. 
A)  d. 
B)  a. 
C)  c. 
D)  b. 
E)  None of these answers is correct.

Question 19

Refer to the following figure when answering the following questions.
Figure 13.1: AD Curve  
-Consider Figure 13.1. Holding inflation constant, if there is a negative aggregate demand shock, the economy would move from point e to point:

Accepted Answer

A)  g. 
B)  c. 
C)  d. 
D)  b. 
E)  a. 
A)  g. 
B)  c. 
C)  d. 
D)  b. 
E)  a.

Question 20

What is the Taylor rule? How effective a tool is it?

Accepted Answer

The Taylor rule is a policy rule that di

In the simple monetary policy rule, if , the AD curve is horizontal.

Under rational expectations, people use ________ to make their best forecasts of the coming rate of inflation.

The effects of 9/11 were a leftward shift in the AD curve; short-run output fell along the AS curve.

If , and , what would the simple monetary rule dictate the real interest rate be if ? If ? In each case, is the economy in an expansion, in a recession, or in the long run?

Which of the following is the aggregate supply curve?

A sudden increase in the price of oil would cause the AS curve to shift up and to the left.

Which of the following countries did NOT adopt an explicit inflation target?

A change in which of the following parameters would cause a movement along the AD curve ?

Refer to the following figure when answering the following questions. Figure 13.5: AS/AD Model -Consider Figure 13.5. If the Fed sets a higher inflation target, under rational expectations, the economy moves from point to point .

If is relatively high, monetary policy is relatively and the AD curve is .

Which of the following shifts the aggregate supply curve?

If British incomes rose, this would be reflected in the short-run model as a shift in the U.S. AS to the right.

Consider the monetary rule . If the inflation rate is 4 percent, the marginal product of capital is 2 percent, and the target rate of inflation is 3 percent, then the real interest rate should be ________ percent.

If equals zero, the AD curve is:

If in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

An increase in military spending will cause the AD curve to shift to the right.

Refer to the following figure when answering the following questions. Figure 13.1: AD Curve -Consider Figure 13.1. If there is a positive aggregate demand shock and inflation remains constant, the economy would move from point e to point:

Refer to the following figure when answering the following questions. Figure 13.1: AD Curve -Consider Figure 13.1. Holding inflation constant, if there is a negative aggregate demand shock, the economy would move from point e to point:

What is the Taylor rule? How effective a tool is it?

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 13: Stabilization Policy and the Asad Framework

In the simple monetary policy rule, if , the AD curve is horizontal.

Under rational expectations, people use ________ to make their best forecasts of the coming rate of inflation.

The effects of 9/11 were a leftward shift in the AD curve; short-run output fell along the AS curve.

If , and , what would the simple monetary rule dictate the real interest rate be if ? If ? In each case, is the economy in an expansion, in a recession, or in the long run?

Which of the following is the aggregate supply curve?

A sudden increase in the price of oil would cause the AS curve to shift up and to the left.

Which of the following countries did NOT adopt an explicit inflation target?

A change in which of the following parameters would cause a movement along the AD curve ?

Refer to the following figure when answering the following questions. Figure 13.5: AS/AD Model -Consider Figure 13.5. If the Fed sets a higher inflation target, under rational expectations, the economy moves from point ________ to point ________.

If is relatively high, monetary policy is relatively ________ and the AD curve is ________.

Which of the following shifts the aggregate supply curve?

If British incomes rose, this would be reflected in the short-run model as a shift in the U.S. AS to the right.

Consider the monetary rule . If the inflation rate is 4 percent, the marginal product of capital is 2 percent, and the target rate of inflation is 3 percent, then the real interest rate should be ________ percent.

If equals zero, the AD curve is:

If in the simple monetary rule and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will:

An increase in military spending will cause the AD curve to shift to the right.

Refer to the following figure when answering the following questions. Figure 13.1: AD Curve -Consider Figure 13.1. If there is a positive aggregate demand shock and inflation remains constant, the economy would move from point e to point:

Refer to the following figure when answering the following questions. Figure 13.1: AD Curve -Consider Figure 13.1. Holding inflation constant, if there is a negative aggregate demand shock, the economy would move from point e to point:

What is the Taylor rule? How effective a tool is it?

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Refer to the following figure when answering the following questions. Figure 13.5: AS/AD Model -Consider Figure 13.5. If the Fed sets a higher inflation target, under rational expectations, the economy moves from point to point .

If is relatively high, monetary policy is relatively and the AD curve is .